UK Care Homes: The UK’s ageing population is a shared challenge and opportunity

The UK’s care home market is undergoing substantial evolution, presenting opportunities for investors amid growing demand and complex structural headwinds. While an ageing population intensifies pressure on the NHS with rising waiting lists and increased prevalence of chronic health conditions, it also drives significant investment appeal in the care sector.

The UK’s population is projected to reach 70 million by mid-2026, with a notable rise in the elderly demographic. The Office for National Statistics (ONS) projects that the 65+ age group will increase by 20% over the next 15 years, outpacing the general population growth of 5%. Specifically, the over-85 population is set to swell from 1.6 million to 2.6 million, which will significantly boost the demand for specialised care facilities, including those for chronic conditions. As the population ages, the prevalence of chronic conditions – such as diabetes and dementia – is projected to jump significantly, increasing demand for specialised care facilities, outpatient endocrinology services, diagnostic centres, chronic disease management and rehabilitation spaces. As patients’ healthcare needs evolve, so too does the healthcare sector.

Despite declining local authority funding and regulatory pressures, the private healthcare market is experiencing steady growth. Annual revenues have grown to £6.8bn, reflecting a 6.3% compound annual growth rate over the past 20 years, according to Assura, the healthcare REIT. Stabilising inflation, declining construction costs, and easing interest rates are improving liquidity, transaction activity and property values, creating a more favourable investment environment. This environment supports the sector’s resilience and potential for growth. These concurrent opposing trends illustrate the care home industry’s bifurcation – a trend mirrored across many Western markets with similar demographic trends. Well-capitalised investors and operators are increasingly attracted to the sector’s long-term growth potential.

Private capital that leverages technology is key to addressing ageing population challenges. Innovations in telemedicine, AI diagnostics, and digital health platforms help to improve care delivery and shift the model from inpatient to more cost-effective outpatient care. These trends enhance care delivery and operational efficiencies through attractive investment opportunities.

Consolidation

The UK’s fragmented care home market presents significant opportunities for consolidation. Larger operators are acquiring smaller providers to achieve economies of scale, while international investors target scalable platforms for long-term growth. Recent high-profile transactions demonstrate growing confidence in the sector. In October, Bridgepoint Advisers sold Care UK, which operates 163 care homes, to Welltower, a US REIT that specialises in high-end private care homes. Private acute hospitals and primary care facilities remain key areas of focus for investors and lenders. In May, the Universities Superannuation Scheme (USS) and Assura announced a £250m joint venture, underscoring growing institutional demand for healthcare assets. Global private equity investors have also shown interest. Capital aims to be deployed within three years. In June, a lender consortium led by Song Capital refinanced Medical Properties Trust’s UK 27-strong hospital portfolio in a £631m deal, reflecting improved debt liquidity in the sector.

Looking ahead, there is potential for deeper integration between the NHS and private providers, possibly facilitated by legislative frameworks that encourage public–private collaboration. The UK care home market stands at the intersection of a demographic-spurred industry crisis and economic opportunity. Investors should approach opportunities with thorough due diligence, mindful of the regulatory, political and public scrutiny of the sector post-pandemic. For investors actively seeking investments in the UK’s care home industry, do not hesitate to contact our team today for a confidential discussion about your investment appetite, M&A targets, due diligence and financing requirements.